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YoY shift: Lean -
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.45pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-
Not scored
Net-tone change vs last year's 10-K.
MD&A
-0.45pp
Lean -
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
No section text extracted for this filing. The 10-K may use a non-standard template that the parser doesn't recognize - the original doc is still linked in the Stats tab.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
impairment+20
underperforming+9
losses+4
closures+4
understated+4
Positive rising
improvements+4
profitability+3
win+2
improved+2
effective+1
MD&A (Item 7)
9,577 words
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion below contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those which are discussed in the “Risk Factors” section in Part I, Item 1A of this 10-K. Also see “Special Note Regarding Forward-Looking Statements” preceding Part I. Additionally, our historical results are not necessarily indicative of the results that may be expected or achieved for any future period.
The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by reference to, the consolidated financial statements and the notes thereto included in this 10-K.
Overview
We are an outdoor sporting goods retailer focused on meeting the everyday needs of the seasoned outdoor veteran, the first-time participant and everyone in between. Our mission is to provide outstanding gear and exceptional service to inspire outdoor memories.
Our business was founded in 1986 as a single retail store in Midvale, Utah. Today, we operate 147 stores in 32 states, totaling approximately 5.5 million gross square feet. We also operate an e-commerce platform at www.sportsmans.com. We do not incorporate the information on or accessible through our website into this 10-K, and you should not consider any information on, or that can be accessed through, our website as part of this 10-K.
Our stores and our e-commerce platform are aggregated into one operating and reportable segment.
Impact of Macroeconomic Conditions
Our financial results and operations have been, and will continue to be, impacted by events outside of our control.
Global economic and business activities continue to face widespread macroeconomic uncertainties, including the impact of international trade policies and increased tariff rates, inflation, elevated interest rates, recession risks and rising global political tensions. Recent changes in international trade policy and the implementation of increased tariff rates have caused substantial uncertainty with respect to our inventory cost. If some of the proposed and current changes to international trade and tariff policy are implemented or continue for a significant length of time, we will experience a material increase in our inventory costs, especially in our Hunting and Shooting Sports and Optics, Electronics, Accessories and Other departments. We cannot predict the ultimate impact of such changes on our financial results for fiscal year 2026 and beyond since such policies remain highly dynamic and evolving. In fiscal year 2025, we purchased additional inventory in anticipation of increased tariff rates to be prepared for the hunting and holiday seasons. We will continue to consider other means to mitigate the impact of increased tariff rates, including by seeking alternative sourcing of our products and by negotiating with our suppliers to absorb a portion of increased costs due to changes in tariff rates and trade policy; however, we cannot provide any assurances that we will be successful in such efforts.
In addition, since the beginning of fiscal year 2023, our business has been and continues to be impacted by consumer inflationary pressures and recessionconcerns. For instance, we experienced softer sales in the early portion of our fiscal fourth quarter, which we believe were driven by external factors such as the government shutdown and weaker-than-expected Black Friday and Cyber Week performance. We have implemented cost reduction measures and reduced investments in future new store openings to reflect sales trends. However, we saw improvements in our sales in the second half of our fourth fiscal quarter and into the beginning of the first quarter of fiscal year 2026, but we remain measured in our outlook for the year.
During the fiscal year ended January 31, 2026, certain retail store locations experienced four-wall Adjusted EBITDA losses and declines in projected cash flows. As a result, we performed an impairment assessment for these locations and we recognized impairmentlosses of $17.8 million as of January 31, 2026 related to ten underperforming store locations. We anticipate closing approximately five of our underperforming stores within the next year, but after the 2026 holiday season. Store closures or other strategic actions may be taken in the future,
which could result in additional impairment charges. We do not plan to open new stores in fiscal year 2026 as we assess our new store expansion strategy and prioritize capital allocation for critical technology investments and debt repayment.
We continue to actively monitor the impact of these macroeconomic factors on our financial condition, liquidity, operations, suppliers, industry and workforce. The extent of the impact of these factors on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected timeframe, will depend on future developments, and the impact on our customers, partners and outfitters, all of which are uncertain and cannot be predicted; however, any continued or renewed disruption resulting from these factors could negatively impact our business.
Fiscal Year
We operate using a 52/53-week fiscal year ending on the Saturday closest to January 31. Fiscal years 2025, 2024 and 2023 ended on January 31, 2026, February 1, 2025 and February 3, 2024, respectively. Each of fiscal years 2025 and 2024 contained 52 weeks of operation and fiscal year 2023 contained 53 weeks of operations.
How We Assess the Performance of Our Business
In assessing the performance of our business, we consider a variety of performance and financial measures. The key measures for determining how our business is performing are net sales, same store sales, gross margin, selling, general and administrative expenses, income from operations and Adjusted EBITDA, which we define as net (loss) income plus interest expense, income tax expense (benefit), depreciation and amortization, stock-based compensation expense, executive transition and severance costs, impairment costs, and other expenses that we do not believe are indicative of our ongoing expenses.
Net Sales and Same Store Sales
Our net sales are primarily received from revenue generated in our stores and also include sales generated through our e-commerce platform. When measuring revenue generated from our stores, we review our same store sales as well as the performance of our stores that have not operated for a sufficient amount of time and include each in same store sales. We include net sales from a store in same store sales on the first day of the 13 th full fiscal month following the store’s grand opening or acquisition by us. We exclude sales from stores that were closed during the period from our same store sales calculation. We include net sales from e-commerce in our calculation of same store sales. For fiscal years consisting of 53 weeks, we exclude net sales during the 53 rd week from our calculation of same store sales. Some of our competitors and other retailers may calculate same store sales differently than we do. As a result, data regarding our same store sales may not be comparable to similar data made available by other retailers.
Measuring the change in year-over-year same store sales allows us to evaluate how our retail store base is performing. Various factors affect same store sales, including:
macroeconomic factors, political trends, social unrest, inflationary pressures, recessionary trends, labor shortages, monetary supply shifts, elevated interest rates, tightening of credit markets, and potential disruptions from the ongoing Russia-Ukraine conflict and rising global political tensions;
consumer preferences, buying trends and overall economic trends;
changes or anticipated changes to laws and government regulations related to some of the products we sell, in particular regulations relating to the sale of firearms and ammunition;
our ability to identify and respond effectively to local and regional trends and customer preferences;
our ability to provide quality customer service that will increase our conversion of shoppers into paying customers;
the success of our omni-channel strategy and our e-commerce platform;
competition in the regional market of a store;
atypical weather;
new product introductions and changes in our product mix; and
changes in pricing and average ticket sales.
We operate in a complex regulatory and legal environment that could negatively impact the demand for our products, which could significantly affect our operations and financial results. State, local, and federal laws and regulations relating to products that we sell may change, sometimes significantly, as a result of political, economic or social events.
For instance, in November 2022, Oregon passed a ballot measure that amended Oregon law to prohibit private citizens from manufacturing, importing, possessing, using, purchasing, selling or transferring a magazine capable of holding (or being readily converted to hold) over ten rounds of ammunition. Additionally, this ballot measure also imposed complex permitting and training requirements for the purchase and sale of firearms. On December 6, 2022, a state Circuit Court judge in Oregon preliminarily enjoined the implementation of the ballot measure. On November 21, 2023, the Circuit Court judge permanently enjoined implementation of the ballot measure upon a determination that the ballot measure was facially unconstitutional under Oregon's state constitution.
On March 12, 2025, the Oregon Court of Appeals reversed the state Circuit Court judge’s permanent injunction, holding that the ballot measure was in fact facially constitutional under Oregon's state constitution. The Oregon Court of Appeals ordered the Circuit Court judge to enter a declaratory judgment consistent with the Court of Appeals’ decision. The plaintiffs filed a petition for review before the Oregon Supreme Court on April 14, 2025, preventing the Circuit Court judge from entering the declaratory judgment pending a decision of the Oregon Supreme Court on whether to grant the petition for review. On June 12, 2025, the Oregon Supreme Court granted the petition for review. We anticipate a decision in the case will be rendered by the Oregon Supreme Court in late 2026. The permanent injunction entered by the Circuit Court Judge will continue to remain in effect pending the decision of the Oregon Supreme Court in this case.
The Circuit Court judge’s permanent injunction of the ballot measure continues to remain in effect pending a decision from the Oregon Supreme Court on the original initiative. The measure was also being challenged in a related case in federal court and was on appeal to the Ninth Circuit Court of Appeals. However, due to the recent ruling of a similar capacity restriction case in California (Duncan vs. Bonta), the Oregon federal court case will likely be remanded to the lower court. We are also actively monitoring Oregon HB 4145, which if passed would further delay the permit requirement of Ballot Measure 114 until January 01, 2028.
We currently operate eight stores in the State of Oregon. If the Oregon Supreme Court upholds the Oregon Court of Appeals March 12, 2025 order and the ballot measure is allowed to take effect, sales of firearms in Oregon may be halted or substantially diminished unless all permitting and training programs are fully developed by the state and/or law enforcement agencies at the time the ballot measure takes effect. If delays in establishing such permitting and training programs occur, it could result in a substantial decline in our sales of firearms and related products and reduce traffic to our stores in Oregon, which would significantly impact on our sales and gross margin. It is still unclear what measures the State of Oregon has undertaken thus far to set up the permitting and training infrastructure called for in the ballot measure.
We are reviewing our store portfolio and estimate that approximately five underperforming stores may be closed. We do not plan to open new stores in fiscal year 2026 as we assess our new store expansion strategy and prioritize capital allocation for critical technology investments and debt repayment. However, opening new stores continues to be an important part of our long-term growth strategy.
We also have been scaling our e-commerce platform and increasing sales through our website, www.sportsmans.com .
We believe the key drivers to increasing our total net sales include:
increasing and improving same store sales in our existing markets;
increasing customer visits to our stores and improving our conversion rate through focused marketing efforts and continually high standards of customer service;
expanding our omni-channel capabilities through refined product assortment, expanded content and expertise and better user experience;
building strong community connections and establishing ourselves as the local choice for hunting and fishing solutions;
increasing our total gross square footage by opening new stores; and
growing our loyalty and credit card programs.
Gross Margin
Gross profit consists of our net sales less cost of goods sold. Gross margin measures our gross profit as a percentage of net sales. Our cost of goods sold primarily consists of merchandise acquisition costs, including freight-in costs, shipping costs, payment term discounts received from the vendor and vendor allowances and rebates associated directly with merchandise and shipping costs related to e-commerce sales.
We believe the key drivers to improving our gross margin are increasing the product mix to higher margin products, particularly fishing, increasing foot traffic within our stores and traffic to our website, improving buying opportunities with our vendor partners and coordinating pricing strategies among our stores and our merchandise group. Our ability to properly manage our inventory can also impact our gross margin. We focus our buying on core items, high-turning products and seasonally relevant merchandise, particularly in ammunition, fishing, camping and personal protection, as these are areas where customer demand is more predictable and where having products in stock matters most to our customers. Successful inventory management ensures we have sufficient high margin products in stock to meet customer demand, while overstocking of items can lead to markdowns in order to help a product sell. This is especially true with respect to our more in demand inventory, with approximately 40% of our products accounting for approximately 80% of our net sales. We ended fiscal year 2025 with $29.1 million less inventory than at the end of fiscal year 2024, an 8.5% decrease. We believe this reflects our disciplined inventory management and positions us well to support growth in our key categories while continuing to improve productivity and inventory turns.
Elevated inflation adversely impacted our gross margins in fiscal years 2024 and 2025. We expect inflation will continue to put pressure on our gross margins for fiscal year 2026.
Gross margins may continue to be affected by the evolving implementation of higher tariff rates. We believe that the overall growth of our business can also help improve our gross margins, because increased merchandise volumes will enable us to maintain our strong relationships with our vendors. If we see significant declines in sales or increases in overstocked inventory, we may experience a decline in gross margins as we use promotions to drive traffic and reduce inventory.
Selling, General and Administrative Expenses
We closely manage our selling, general, and administrative expenses. Our selling, general, and administrative expenses are comprised of payroll, rent and occupancy, depreciation and amortization, acquisition expenses, pre-opening expenses and other operating expenses, including stock-based compensation expense. Pre-opening expenses include expenses incurred in the preparation and opening of a new store location, such as payroll, travel and supplies, but do not include the cost of the initial inventory or capital expenditures required to open a location.
Our selling, general, and administrative expenses are primarily influenced by the volume of net sales of our locations, except for our corporate payroll, rent and occupancy and depreciation and amortization, which are generally fixed in nature. We control our selling, general, and administrative expenses through a budgeting and reporting process that allows our personnel to adjust our expenses as trends in net sales activity are identified.
Income from Operations
Income from operations is gross profit less selling, general, and administrative expenses. We use income from operations as an indicator of the productivity of our business and our ability to manage selling, general, and administrative expenses.
Adjusted EBITDA
We define Adjusted EBITDA as net (loss) income plus interest expense, income tax expense (benefit), depreciation and amortization, stock-based compensation expense, executive transition and severance costs, impairment costs, and other expenses that we do not believe are indicative of our ongoing expenses. We define Adjusted EBITDA margin as, for any period, the Adjusted EBITDA divided by net sales. In evaluating our business, we use Adjusted EBITDA and Adjusted EBITDA margin as additional measurement tools for purposes of business decision-making, including evaluating store performance, developing budgets and managing expenditures. See “—Non-GAAP Financial Measures."
Results of Operations
The following table summarizes key components of our results of operations as a percentage of net sales during the periods presented:
Fiscal Year Ended
January 31,
February 1,
February 3,
Percentage of net sales:
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Impairment expense
(Loss) income from operations
Other losses
Interest expense
(Loss) income before income taxes
Income tax (benefit) expense
Net (loss) income
Adjusted EBITDA
The following table shows our percentage of net sales by department during the periods presented:
Fiscal year Ended
January 31,
February 1,
February 3,
Department
Product Offerings
Camping
Backpacks, camp essentials, canoes and kayaks, coolers, outdoor cooking equipment, sleeping bags, tents and tools
Apparel
Camouflage, jackets, hats, outerwear, sportswear, technical gear and work wear
Fishing
Bait, electronics, fishing rods, flotation items, fly fishing, lines, lures, reels, tackle and small boats
Footwear
Hiking boots, socks, sport sandals, technical footwear, trail shoes, casual shoes, waders and work boots
Hunting and Shooting Sports
Ammunition, archery items, ATV accessories, blinds and tree stands, decoys, firearms, reloading equipment and shooting gear
Optics, Electronics, Accessories, and Other
Gift items, GPS devices, knives, lighting, optics, two-way radios, and other license revenue, net of revenue discounts
Total
Fiscal Year 2025 Compared to Fiscal Year 2024
Net Sales and Same Store Sales . Net sales increased by $11.5 million, or 1.0%, to $1,209.2 million in fiscal year 2025 compared to $1,197.6 million in fiscal year 2024. Our net sales increased primarily due sales growth in our Hunting and Shooting Sports and Fishing departments. We achieved meaningful improvements to our core inventory in-stocks and implemented a focused strategy to ensure our merchandise is seasonally timed and regionally relevant to win the seasons in hunting and fishing. Additionally, sales growth was driven by our strategic decision to lean into personal protection, including less-lethal alternatives. We also made a strategic shift to a digital first go-to-market strategy, moving away from the traditional mode of paper advertisements, which we believe helped increase sales. No new stores were opened in 2024, however, we opened one new store in November of 2025, that contributed $2.3 million to net sales. E-commerce driven sales comprised more than 20% of total sales in fiscal year 2025 and increased by 6.6% compared to fiscal year 2024. Same store sales increased by 1.0% for fiscal year 2025 compared to fiscal year 2024, primarily as a result of the factors discussed above that impacted net sales. As of January 31, 2026, we had 146 stores included in our same store sales calculation.
Our Hunting and Shooting Sports and Fishing departments saw a net sales increase of $30.5 million and $12.6 million, respectively, during fiscal year 2025 compared to fiscal year 2024, primarily driven by increased unit sales due to our continued improvement on maintaining sufficient inventory in-stocks of core items. Additionally, this growth was driven by our strategy to ensure our merchandise is seasonally timed and regionally relevant to win the seasons in hunting and fishing and by our strategic decision to lean into personal protection, including less-lethal alternatives. Our Camping, Optics, Electronics, Accessories and Other, Footwear, and Apparel departments saw decreases in net sales of $14.1 million, $9.1 million, $6.5 million, and $2.0 million, respectively, for fiscal year 2025 compared to fiscal year 2024. We believe these decreases reflect the impact of broader macroeconomic conditions affecting the economy and US consumer, resulting in lower unit sales in these categories that are highly discretionary in nature. Within our Hunting and Shooting Sports department, sales from our ammunition and firearm categories increased by $8.9 million and $7.7 million, or 5.0% and 2.7%, respectively, for fiscal year 2025 compared to fiscal year 2024. The increase in these categories was primarily due to our change to every day low pricing in key product groups within the ammunition category, our bulk unit ammunition strategy, and improved in-stocks on core products. We continue to consistently outpace the adjusted NICS background check data, achieving firearm unit sales increases, suggesting market share gains within the firearm space.
Our Fishing and Hunting and Shooting Sports departments saw increased same store sales of 10.2% and 4.2%, respectively, during fiscal year 2025 as compared to fiscal year 2024. Our Camping, Optics, Electronics, Accessories and Other, Footwear, and Apparel departments saw decreased same store sales of 10.2%, 8.8%, 8.7% and 2.4%, respectively. Ammunition and firearm same store sales, included within our Hunting and Shooting Sports department, increased by 4.7% and 2.4%, respectively, for fiscal year 2025 compared to fiscal year 2024.
Gross Profit. Gross profit increased by $3.1 million, or 0.8%, to $373.5 million for fiscal year 2025 from $370.5 million for fiscal year 2024. As a percentage of net sales, gross profit remained flat at 30.9% for fiscal year 2025 compared to fiscal year 2024. While we experienced improved margin rates within most of our departments, these improvements were offset by a decrease in margins in our Hunting and Shooting Sports department and an unfavorable shift in mix to firearms and ammunition, which carry a lower margin profile. Gross profit was additionally impacted by the prior year correction of customer loyalty liability, which carried approximately a 0.2% impact to gross profit as a percentage of net sales.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $4.3 million, or 1.1%, to $393.0 million for fiscal year 2025 from $388.7 million for fiscal year 2024. This increase was primarily due to increases in payroll and other non-recurring expenses, such as legal accrual and executive transition costs, of $2.3 million and $1.5 million, respectively, reflecting our reinvestment into customer facing and sales driving areas of the business. These increases were partially offset by a decrease of $1.4 million depreciation expense. As a percentage of net sales, selling, general, and administrative expenses remained flat at 32.5% of net sales for fiscal year 2025 as compared to fiscal year 2024.
Interest Expense. Interest expense increased by $1.4 million, or 11.4%, to $13.7 million in fiscal year 2025 from $12.3 million for fiscal year 2024. Interest expense increased primarily as a result of increased borrowings under our revolving credit and term loan facilities for fiscal year 2025 compared to fiscal year 2024.
Impairment. During the fiscal year ended January 31, 2026, certain retail store locations experienced four-wall Adjusted EBITDA losses and declines in projected cash flows. As a result, we performed an impairment assessment for these locations. As of January 31, 2026, we recognized impairment costs of $17.8 million related to ten underperforming store locations. We anticipate closing approximately five of our underperforming stores within the next year, but after the 2026 holiday season. Store closures or other strategic actions may be taken in the future, which could result in additional impairment charges. No impairment charges were recorded in fiscal year 2024.
Income Taxes. We recorded an income tax benefit of $1.1 million for fiscal year 2025 compared to income tax expense of $1.9 million for fiscal year 2024. Our effective tax rate was 2.1% during fiscal year 2025 compared to -6.2% in fiscal year 2024. The change in our effective tax rate was primarily driven by the non-cash valuation allowance related to our deferred tax assets.
Fiscal Year 2024 Compared to Fiscal Year 2023
Net Sales and Same Store Sales . Net sales decreased by $90.4 million, or 7.0%, to $1,197.6 million in fiscal year 2024 compared to $1,288.0 million in fiscal year 2023. Net sales in fiscal year 2023 were positively impacted by $16.3 million of net sales due to fiscal year 2023 having an additional week of operations compared to the fiscal year 2024. Our net sales decreased primarily due to the continued impact of consumer inflationary pressures and recessionaryconcerns on discretionary spending, resulting in a decline in store traffic and lower demand across most product categories and fiscal year 2023 containing 53 weeks of operations as compared to 52 weeks of operations in fiscal year 2024. These headwinds were partially offset by same store sales growth in our Fishing department. Stores that have been open for less than 12 months and were, therefore, not included in our same store sales, contributed $30.8 million to net sales. E-commerce driven sales comprised more than 20% of total sales in fiscal year 2024. Same store sales decreased by 7.8% for fiscal year 2024 compared to fiscal year 2023, primarily as a result of the factors discussed above that impacted net sales. As of February 1, 2025, we had 146 stores included in our same store sales calculation. As fiscal year 2023 contained 53 weeks of operations, we have excluded net sales during the first week of fiscal year 2023 from our calculation of same store sales.
Our Fishing department saw a net sales increase of $8.6 million during fiscal year 2024 compared to fiscal year 2023, primarily driven by our reset of fishing inventory. Our Hunting and Shooting Sports, Apparel, Footwear, Camping and Optics, Electronics, Accessories and Other departments saw decreases in net sales of $51.5 million, $23.6 million, $18.2 million, $4.1 million and $1.4 million, respectively, for fiscal year 2024 compared to fiscal year 2023. These decreases were primarily driven by the continued impact of consumer inflationary pressures and recessionaryconcerns on discretionary spending, resulting in a decline in store traffic and lower demand across most product categories and fiscal year 2023 containing 53 weeks of operations as compared to 52 weeks of operations in fiscal year 2024. Within our Hunting and Shooting Sports department, sales from our firearms and ammunition categories decreased by $14.5 million and $22.2 million, or 4.8% and 11.0%, respectively, for fiscal year 2024 compared to fiscal year 2023. These decreases were primarily driven by consumer inflationary pressures on discretionary spending and fiscal year 2023 containing 53 weeks of operations as compared to 52 weeks of operations for fiscal year 2024.
Our Fishing department saw increased same store sales of 6.2% during fiscal year 2024 as compared to fiscal year 2023. Our Apparel, Footwear, Hunting and Shooting Sports, Camping, and Optics, Electronics, Accessories and Other departments saw decreased same store sales of 21.3%, 19.7%, 7.8%, 3.4%, and 2.4%, respectively. Firearms and ammunition same store sales, included within our Hunting and Shooting Sports department, decreased by 7.3% and 12.6%, respectively, for fiscal year 2024 compared to fiscal year 2023. As fiscal year 2023 contained 53 weeks of operations, we have excluded net sales during the first week of fiscal year 2023 from our calculation of same store sales.
Gross Profit. Gross profit decreased by $12.9 million, or 3.4%, to $370.5 million for fiscal year 2024 from $383.4 million for fiscal year 2023. As a percentage of net sales, gross profit increased to 30.9% for fiscal year 2024 compared to 29.8% for fiscal year 2023 primarily driven by increased product margins in our Apparel and Footwear departments, as compared to last year, in which clearance events in our Apparel and Footwear departments put pressure on gross margin, partially offset by increased shrink.
Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased by $20.1 million, or 4.9%, to $388.7 million for fiscal year 2024 from $408.8 million for fiscal year 2023. This decrease was primarily due to decreases in payroll and pre-opening expenses of $14.0 million and $5.8 million, respectively, primarily related to our ongoing cost reduction efforts and decision to not open new stores in fiscal year 2024. These decreases were partially offset by an increase of $3.3 million and $1.5 million in rent and depreciation expenses, respectively, primarily driven by a full year of expenses related to the 15 new locations opened over the course of fiscal year 2023.
On a per store basis, our payroll and other operating expenses were down approximately 11% and 5%, respectively, compared to fiscal year 2023. As a percentage of net sales, selling, general, and administrative expenses increased to 32.5% of net sales during fiscal year 2024 compared to 31.7% of net sales in fiscal year 2023, as a result of the factors discussed above.
Interest Expense. Interest expense decreased by $0.6 million, or 4.6%, to $12.3 million in fiscal year 2024 from $12.9 million for fiscal year 2023. Interest expense decreased primarily as a result decreased borrowings under our revolving credit and term loan facilities for fiscal year 2024 compared to fiscal year 2023.
Income Taxes. We recorded an income tax expense of $1.9 million for fiscal year 2024 compared to income tax benefit of $9.2 million for fiscal year 2023. Our effective tax rate was -6.2% during fiscal year 2024 compared to 24.1% in fiscal year 2023. The change in our effective tax rate was primarily driven by the creation of a non-cash valuation allowance related to our deferred tax assets during fiscal year 2024.
Seasonality
Net sales are typically higher in our third and fourth fiscal quarters than in our first and second fiscal quarters because of the openings of hunting seasons across the country and consumer holiday buying patterns. We also incur additional expenses in our third and fourth fiscal quarters due to higher sales volume and increased staffing in our stores. We anticipate our net sales will continue to reflect this seasonal pattern. On average, over the last three fiscal years, we have generated approximately 27.0% and 28.3% of our net sales in the third and fourth fiscal quarters, respectively, which includes the holiday selling season as well as the opening of the Fall hunting season. We anticipate our net sales will continue to reflect this seasonal pattern. However, Spring hunting, Father's Day and the availability of hunting and fishing throughout the year in many of our markets counterbalance this seasonality to a certain degree.
The timing of our new retail store openings also may have an impact on our quarterly results. First, we incur certain non-recurring expenses related to opening each new retail store, which are expensed as they are incurred. Second, most store expenses generally vary proportionately with net sales, but there is also a fixed cost component, which includes occupancy costs. These fixed costs typically result in lower store profitability during the initial period after a new retail store opens. Due to both of these factors, new retail store openings may result in a temporary decline in operating profit, in dollars and/or as a percentage of net sales.
Weather conditions affect outdoor activities and the demand for related apparel and equipment. Customers’ demand for our products, and, therefore, our net sales, can be significantly impacted by weather patterns on a local, regional and national basis.
Liquidity and Capital Resources
Overview; Uses and Sources of Cash
As of January 31, 2026, we had cash and cash equivalents of $1.7 million and working capital, consisting of current assets less current liabilities, of $88.7 million. We also had $106.1 million available for borrowing under our senior secured revolving credit facility as of January 31, 2026, calculated based on borrowing base restrictions for the revolving credit facility.
Our primary cash requirements are for seasonal working capital needs, capital expenditures related to ongoing operational needs and new system investments. For both the short-term and the long-term, our primary sources of cash are borrowings under our senior secured revolving credit facility and operating cash flows. We believe that our cash on hand, cash generated by operating activities and funds available under our revolving credit facility will be sufficient to finance our operating activities and meet our cash requirements for at least the next twelve months and beyond. With no new stores planned for fiscal year 2026, we intend to prioritize the repayment of outstanding debt with any excess cash flow.
We are reviewing our store portfolio and estimate that approximately five underperforming stores may be closed. We do not plan to open new stores in fiscal year 2026 as we assess our new store expansion strategy and prioritize capital allocation for critical technology investments and debt repayment. With no new stores planned for fiscal year 2026, we intend to prioritize the repayment of outstanding debt with any excess cash flow. If we close underperforming stores, such closures could result in additional expenses. For example, while we have the right to terminate some of our leases under specified conditions by making specified payments, we may not be able to terminate a particular lease if or when we would like to do so. In other cases, if we decide to close a store, we may be required to continue paying rent and operating expenses for the balance of the lease term. The performance of any of these obligations may be costly.
Material Cash Requirements
Our material cash requirements from known contractual and other obligations are primarily for general operating expenses and other expenses discussed below.
Purchase Obligations. In the ordinary course of business, we enter into arrangements with vendors to purchase merchandise in advance of expected delivery. We or the vendor can generally terminate the purchase orders at any time. These purchase orders do not contain any termination payments or other penalties if cancelled.
Lease Obligations. Lease commitments consist principally of leases for our retail stores, corporate office and distribution center and equipment at our retail locations. Our leases often include options which allow us to extend the terms beyond the initial lease term. For fiscal year 2026, our expected operating and finance lease payments will be $76.0 million and our total committed operating and finance lease payments are $421.5 million as of January 31, 2026. Other operating lease obligations consist of distribution center equipment. See Note 5 to our Consolidated Financial Statements for further discussion on our leases.
Capital Expenditures. For fiscal year 2025, we incurred approximately $19.5 million in capital expenditures, net of tenant allowances, primarily related to strategic technological investments and general store maintenance. We expect capital expenditures net of tenant allowances to be between $20 million and $25 million for fiscal year 2026, primarily related to strategic technological investments, such as planogramming, merchandising and replenishment and store scheduling tools, and general store fleet maintenance. We intend to fund these capital expenditures with our operating cash flows, existing cash and cash equivalents and funds available under our revolving credit facility. Other investment opportunities, such as potential strategic acquisitions or store expansion rates in excess of those presently planned, may require additional funding.
Principal and Interest Payments. We maintain a $350.0 million revolving credit facility and a $45.0 million term loan facility. As of January 31, 2026, $57.9 million was outstanding under the revolving credit facility and $44.1 million was outstanding under the term loan facility. Assuming no additional repayments or borrowings on our revolving credit facility after January 31, 2026, our interest payments would be approximately $7.4 million for fiscal
year 2026 based on the interest rate as of January 31, 2026. As of January 31, 2026, our weighted average interest rate on the amounts outstanding under our revolving credit facility and our term loan facility was 7.15%. See “—Indebtedness” below for additional information regarding our revolving credit facility and term loan facility, including the interest rate applicable to any borrowing under such facilities.
Cash Flows
Cash flows provided by (used in) operating, investing and financing activities are shown in the following table:
Fiscal Year Ended
January 31,
February 1,
(in thousands)
Cash flows provided by operating activities
Cash flows used in investing activities
Cash (used in) provided by financing activities
Cash and cash equivalents at end of period
Net cash provided by operating activities was $31.3 million for fiscal year 2025, compared to net cash provided by operating activities of $34.1 million for fiscal year 2024, a change of approximately $2.8 million. The decrease in our cash flows provided by operating activities was primarily driven by timing of receipts of inventory.
Net cash used in investing activities was $22.4 million for fiscal year 2025 compared to $14.5 million for fiscal year 2024. For fiscal year 2025, we incurred capital expenditures in connection with opening a new store, strategic technological investments, and store fleet maintenance. Our cash flows used in investing activities in fiscal year 2024 primarily related to strategic technological investments, such as planogramming, merchandising and replenishment and store scheduling tools, and general store fleet maintenance.
Net cash used in financing activities was $10.1 million for fiscal year 2025 compared to net cash used in financing activities of $20.0 million for fiscal year 2024, a decrease of approximately $9.9 million. The cash used in financing activities was primarily driven by our reduction of borrowings under our revolving credit and term loan facilities.
Indebtedness
We maintain a $350.0 million revolving credit facility, with $57.9 million outstanding as of January 31, 2026, and have an outstanding term loan with $44.1 million outstanding as of January 31, 2026. Our revolving credit facility is governed by an amended and restated credit agreement with a consortium of banks led by Wells Fargo Bank, National Association. Our term loan is governed by an ABL term loan credit agreement with PLC Agent, LLC, as administrative and collateral agent for various lenders affiliated with Pathlight Capital. Available borrowings under our revolving credit facility are subject to a borrowing base calculation. As of January 31, 2026, we had an aggregate amount of $106.1 million available for borrowing under our revolving credit facility, calculated based upon certain borrowing base restrictions, and $3.0 million in stand-by commercial letters of credit.
Borrowings under the revolving credit facility bear interest based on either the base rate or Term SOFR (as defined by the credit agreement governing the revolving credit facility), at our option, in each case plus an applicable margin. The base rate is the greatest of (1) the floor rate (as defined in the credit agreement as a rate of interest equal to 0.0%) (2) Wells Fargo’s prime rate, (3) the federal funds rate (as defined in the applicable credit agreement) plus 0.50% or (4) the one-month Term SOFR (as defined in the applicable credit agreement) plus 1.00%. The applicable margin for loans under the revolving credit facility, which varies based on the average daily availability, ranges from 0.25% to 0.50% per year for base rate loans and from 1.35% to 1.60% per year for Term SOFR loans. We are required to pay a commitment fee for the unused portion of the revolving credit facility, which will range from 0.20% to 0.225% per annum, depending on the average daily availability under the revolving credit facility.
Borrowings under the term loan facility bear interest at a rate equal to (i) a specified term secured overnight financing rate (SOFR), plus (ii) 0.10% as a SOFR adjustment, plus (iii) the applicable margin as specified in the Term Loan. The applicable margin means either 3.50% or 6.50% depending on the type of term loan. Under the
Term Loan, loans may be required to be converted to base rate loans and in such case, the applicable margin rate will increase by 1.0%.
Each of the subsidiaries of Holdings is a borrower under the revolving credit facility and the term loan, and all obligations under the revolving credit facility and the term loan are guaranteed by Holdings. All of the obligations under the revolving credit facility and the term loan are secured by a lien on substantially all of Holdings’ assets and assets of all of Holdings’ subsidiaries, including a pledge of all capital stock of each of Holdings’ subsidiaries. The lien securing the obligations under the revolving credit facility is a first priority lien as to certain liquid assets, including cash, accounts receivable, deposit accounts and inventory. The lien securing the obligations under the term loan facility is a first priority lien as to equipment, fixtures, intellectual property and equity interests.
We may be required to make mandatory prepayments under the revolving credit facility and the term loan in the event of a disposition of certain property or assets, in the event of receipt of certain insurance or condemnation proceeds, upon the issuance of certain debt or equity securities, upon the incurrence of certain indebtedness for borrowed money or upon the receipt of certain payments not received in the ordinary course of business.
Our revolving credit facility and term loan facility each require us to maintain a minimum availability at all times of not less than the greater of $30.0 million and 10% of the gross borrowing base. In addition, the credit agreements governing each of our revolving credit facility and our term loan facility contain customary affirmative and negative covenants, including covenants that limit our ability to incur, create or assume certain indebtedness, to create, incur or assume certain liens, to make certain investments, to make sales, transfers and dispositions of certain property and to undergo certain fundamental changes, including certain mergers, liquidations and consolidations. The revolving credit facility and term loan facility also contain customary events of default, including defaults triggered by defaults under the other facility. As of January 31, 2026, we were in compliance with all covenants under the credit agreements governing each of our revolving credit facility and our term loan facility.
Critical Accounting Estimates
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In connection with the preparation of the financial statements, we are required to make assumptions, make estimates and apply judgment that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that we believe to be relevant at the time the consolidated financial statements are prepared. On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
Our significant accounting policies are discussed in Note 2 to our Consolidated Financial Statements elsewhere in this 10-K. We believe that the following accounting policies are the most critical to aid in fully understanding and evaluating our reported financial results.
Revenue Recognition
We operate solely as an outdoor retailer, which includes both retail stores and an e-commerce platform, that offers a broad range of products in the United States and online. Generally, all revenues are recognized when control of the promised goods is transferred to customers, in an amount that reflects the consideration in exchange for those goods. Accordingly, we implicitly enter into a contract with customers to deliver merchandise inventory at the point of sale. Collectability is reasonably assured since we only extend immaterial credit purchases to certain municipalities.
Substantially all of our revenue is for single performance obligations for the following distinct items:
Retail store sales
e-commerce sales
Gift cards and loyalty reward program
For performance obligations related to retail store and e-commerce sales contracts, we typically transfer control, for retail stores, upon consummation of the sale when the product is paid for and taken by the customer and, for e-commerce sales, when the products are tendered for delivery to the common carrier.
The transaction price for each contract is the stated price on the product, reduced by any stated discounts at that point in time. We do not engage in sales of products that attach a future material right which could result in a separate performance obligation for the purchase of goods in the future at a material discount. The implicit point-of-sale contract with the customer, as reflected in the transaction receipt, states the final terms of the sale, including the description, quantity, and price of each product purchased. Payment for our contracts is due in full upon delivery. The customer agrees to a stated price implicit in the contract that does not vary over the contract.
The transaction price relative to sales subject to a right of return reflects the amount of estimated consideration to which we expect to be entitled. This amount of variable consideration included in the transaction price, and measurement of net sales, is included in net sales only to the extent that it is probable that there will be no significant reversal in a future period. Actual amounts of consideration ultimately received may differ from our estimates. The allowance for sales returns is estimated based upon historical experience and a provision for estimated returns is recorded as a reduction in sales in the relevant period. The estimated merchandise inventory cost related to the sales returns is recorded in prepaid expenses and other. If actual results in the future vary from our estimates, we adjust these estimates, which would affect net sales and earnings in the period such variances become known.
Contract liabilities are recognized primarily for gift card sales and our loyalty reward program. Cash received from the sale of gift cards is recorded as a contract liability in accrued expenses, and we recognize revenue upon the customer’s redemption of the gift card. Gift card breakage is recognized as revenue in proportion to the pattern of customer redemptions by applying a historical breakage rate of 4.0% when no escheat liability to relevant jurisdictions exists. We do not sell or provide gift cards that carry expiration dates. We recognized revenue for the breakage of loyalty reward points as revenue in proportion to the pattern of customer redemption of the points by applying an estimated breakage rate of 35% using historical rates and future expectations.
During the fourth quarter of fiscal year 2025, we identified an understated liability that resulted in overstated revenue related to the accounting for certain customer loyalty program benefits. Management evaluated the understated liability and overstated revenue in accordance with the guidance in SEC Staff Accounting Bulletin No. 99 and SEC Staff Accounting Bulletin No. 108 and concluded that the understated amount was not material to any previously issued financial statements. Management further concluded that the correction of the understated liability was not material to our consolidated financial statements for fiscal year 2025. We recorded the full correction during the current fiscal year. The total $4.4 million out-of-period adjustment represents a reduction to revenue, of which approximately $2.8 million relates to prior years.
As it relates to e-commerce sales, we account for shipping and handling as fulfillment activities, and not a separate performance obligation. Accordingly, we recognize revenue for only one performance obligation, the sale of the product, at the shipping point (when the customer gains control). Revenue associated with shipping and handling is not material. The costs associated with fulfillment are recorded in costs of goods sold.
We offer promotional financing and credit cards issued by a third-party bank that manages and directly extends credit to our customers. We provide a license to our brand and marketing services, and we facilitate credit applications in our stores and online. The banks are the sole owners of the accounts receivable generated under the program and, accordingly, we do not hold any customer receivables related to these programs and act as an agent in the financing transactions with customers. We are eligible to receive a profit share from certain of our banking
partners based on the annual performance of their corresponding portfolio, and we receive monthly payments based on forecasts of full-year performance. This is a form of variable consideration. We record such profit share as revenue over time using the most likely amount method, which reflects the amount earned each month when it is determined that the likelihood of a significant revenue reversal is not probable, which is typically monthly. Profit-share payments occur monthly, shortly after the end of each program month.
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from revenue.
Sales returns
We estimate a reserve for sales returns and record the respective reserve amounts, including a right to return asset when a product is expected to be returned and resold. Historical experience of actual returns, and customer return rights are the key factors used in determining the estimated sales returns.
Inventory Valuation
Inventory is measured at the lower of cost or net realizable value. Cost is determined using the weighted average cost method. We estimate a provision for inventory shrinkage based on our historical inventory accuracy rates as determined by periodic cycle counts. The allowance for damaged goods from returns is based upon our historical experience. We also adjust inventory for obsolete or slow-moving inventory based on inventory productivity reports and by specific identification of obsolete or slow-moving inventory. Had our estimated inventory reserves been lower or higher by 10% as of January 31, 2026, our cost of sales would have been correspondingly lower or higher by approximately $0.5 million.
Impairment of Long-Lived Assets
We review our long-lived assets for impairment on a quarterly basis, when events or circumstances indicate that the carrying value of the assets may not be recoverable. Events or circumstances primarily include an assessment of historical cash flows and also include other circumstances including changes in the economic environment, changes in the manner in which assets are used, unfavorable changes in legal factors or business climate, and projections for future performance. Historical store-level cash flow less than our internal threshold is considered an indicator of impairment. In such situations, we determine the recoverability of the asset value by performing an analysis at the lowest level for which independent cash flows can be identified, which is typically the store level. We use an estimate of the future undiscounted net cash flows of the related asset or group of assets over their remaining useful lives in measuring whether the assets are recoverable. An impairmentloss is recognized when the carrying amount exceeds the undiscounted net cash flows, and is measured by the difference between the fair value and carrying value of the asset group.
During the fiscal year ended January 31, 2026, certain retail store locations experienced four-wall Adjusted EBITDA losses and declines in projected cash flows. As a result, we performed an impairment assessment for these locations. If the carrying amount of a store exceeded its estimated future undiscounted cash flows, an impairmentloss was recognized based on the fair value of the asset. We estimated fair value using a combination of available market data, discounted future cash flows, and replacement cost models.
The long-lived asset impairmentloss calculation contains uncertainty since management must use judgment to estimate each asset group’s future sales, profitability and cash flows. When preparing these estimates, we consider historical results and current operating trends and consolidated sales, profitability and cash flow results and forecasts. These estimates can be affected by a number of factors including general economic and regulatory conditions, the continued efforts of competitors to gain market share, and consumer spending patterns.
Management continues to monitor these and other store locations for changes in operating performance, market conditions, and other indicators of potential impairment. As of January 31, 2026, we recognized impairmentlosses of $17.8 million related to ten underperforming store locations. We anticipate closing approximately five of our underperforming stores in the second half of 2026. Store closures or other strategic actions may be taken in the
future, which could result in additional impairment charges.
Leases
We have leases for our retail stores facilities, distribution center, and corporate office. In accordance with ASC 842, which we adopted on February 3, 2019, we determine if an arrangement is a lease at inception. Lease liabilities are calculated using the present value of future payments and recognized at the commencement date based on the present value of lease payments over the reasonably certain lease term. As our leases generally do not provide an implicit rate, we used an estimated incremental borrowing rate (“IBR”) to determine the present value of lease payments. The IBR is determined by using our credit rating to develop a yield curve that approximates our market risk profile.
Off Balance Sheet Arrangements
We are not party to any off balance sheet arrangements.
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, see Note 2 to our Consolidated Financial Statements included elsewhere in this 10-K.
Non-GAAP Financial Measures
In evaluating our business, we use Adjusted EBITDA and Adjusted EBITDA margin as supplemental measures of our operating performance. We define Adjusted EBITDA as net (loss) income plus interest expense, income tax expense (benefit), depreciation and amortization, stock-based compensation expense, executive transition costs, cancelled contract expenses, expenses related to our cost reduction plan, legal expenses and impairment costs. Net loss is the most comparable GAAP financial measure to Adjusted EBITDA. We define Adjusted EBITDA margin as, for any period, the Adjusted EBITDA for that period divided by the net sales for that period. We consider Adjusted EBITDA and Adjusted EBITDA margin important supplemental measures of our operating performance and believe they are frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry. Other companies in our industry, however, may calculate Adjusted EBITDA and Adjusted EBITDA margin differently than we do. Management also uses Adjusted EBITDA and Adjusted EBITDA margin as additional measurement tools for purposes of business decision-making, including evaluating store performance, developing budgets and managing expenditures. Management believes Adjusted EBITDA and Adjusted EBITDA margin allow investors to evaluate our operating performance and compare our results of operations from period to period on a consistent basis by excluding items that management does not believe are indicative of our core operating performance.
Adjusted EBITDA is not defined under GAAP and is not a measure of operating income, operating performance or liquidity presented in accordance with GAAP. Adjusted EBITDA has limitations as an analytical tool, and when assessing our operating performance, you should not consider Adjusted EBITDA in isolation or as a substitute for net income or other consolidated statement of operations data prepared in accordance with GAAP. Some of these limitations include, but are not limited to:
Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
Adjusted EBITDA may be defined differently by other companies, and, therefore, it may not be directly comparable to the results of other companies in our industry;
Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; and
Adjusted EBITDA does not reflect income taxes or the cash requirements for any tax payments.
A reconciliation of net (loss) income to Adjusted EBITDA and a calculation of Adjusted EBITDA margin is set forth below for the periods presented (amounts in thousands).
Fiscal Year Ended
January 31,
February 1,
February 3,
Net (loss) income
Interest expense
Income tax expense (benefit) (1)
Depreciation and amortization
Stock-based compensation expense (2)
Executive transition costs (3)
Cancelled contract (4)
Cost reduction plan (5)
Legal expense (6)
Impairment costs (7)
Adjusted EBITDA
Net sales
Net (loss) income margin (8)
Adjusted EBITDA margin (8)
A non-cash valuation allowance of $10.1 million was created during fiscal year 2024 related to our deferred tax assets during fiscal year 2024.
Stock-based compensation expense represents non-cash expenses related to equity instruments granted to outfitters under the Sportsman's Warehouse Holdings, Inc. 2019 Performance Incentive Plan and the Sportsman's Warehouse Holdings, Inc. Employee Stock Purchase Plan.
Expenses incurred relating to the departure of officers and the recruitment of key members of our senior management team.
Represents fees and expenses related to a settlement in the cancellation of a contract related to our information technology systems.
Severance expenses paid as part of our cost reduction plan implemented during fiscal year 2023.
Represents costs related to legal settlements and related fees and expenses.
Represents impairment costs primarily related to leasehold improvements, operating lease assets, and other fixed assets.
We calculate net income margin as net income divided by net sales and we define Adjusted EBITDA margin as Adjusted EBITDA divided by net sales.
